HANK KALET

Pockets picked clean

"But I am here to tell you what you
already know in your gut: This is not a political scandal. It is not
another Whitewater, where you can't figure out what happened. We all
know what happened. A bunch of bastards picked the pockets of their
own employees. That's not a scandal. It's a blinkin' outrage." --
Richard Cohen, Washington Post, Jan. 15

The stock plummeted and there was nothing
they could do about it.

So they watched as their life-savings
evaporated, watched as Enron's stock prices fell, from $32.20 a share
on Oct. 17 to $13.81 on Oct. 29 and then to $9.98 on a share on Nov.
12 and to less than $1 a share by late November.

Enron, a global energy-trading company,
became the largest bankruptcy in US history in December, just six
weeks after it had admitted to overstating profits by $586 million
over a four-year period. The admission led to a stock sell-off that
drove prices down, wiping out thousands of retirement accounts and
leading to a series of investigations that ultimately could find
their way to the White House door.

The crux of the scandal is this: High-level
company officials apparently knew about the financial problems that
were about to take down Enron and dumped their own stocks before the
bottom fell out, making millions while employees were prohibited from
doing the same. According to employees who testified before the
Senate Commerce Committee last month, the company encouraged
employees to invest in a 401(k) by matching contributions with
company stock. Under the plan, workers under 50 were prohibited from
selling the matching shares and many converted their own
contributions into Enron stock. In October 2000, according to the
Washington Post, 47% of the assets of Enron's 401(k) plan were
invested in its stock. At the same time, the employees say they were
not told of the financial trouble the firm was in or that senior
managers were selling millions of dollars' worth of stock.

Then comes the fall. Enron admitted in
October 2001, following an internal probe, that it had overstated
profits by $586 million over the last four years. Stock prices
collapsed and the company went under.

The Justice Department has opened a criminal
investigation into the collapse and several congressional committees
have launched probes. In addition, shareholders and employees have
filed civil suits against the company and its officers.

And it appears the Bush administration may
have had advanced warning of Enron's troubles. Company officials
seeking federal help contacted the administration, though Treasury
Secretary Paul H. O'Neill and Commerce Secretary Donald L. Evans said
no help was offered. Enron officials had been major contributors to
Bush over the years and apparently were involved in the drafting of
the administration's energy policy in the spring.

Whatever the political fallout -- the
Democrats are hoping to use the Enron collapse to help them win back
a majority in both houses of Congress - the human fallout is much
worse. And what's scary is that what happened at Enron can happen
elsewhere.

Essentially, as David Mosberg points out in
In These Times, the Enron crash is "a cautionary guide to many
of the dominant trends in the American economy."

"For the past quarter century, a growing
ideological chorus has contended that markets are rational and
efficient -- therefore good -- and any interference, especially by
government, is bad," he writes. "But as Joseph Stiglitz, a winner of
this year's Nobel Prize in economics, has argued, if markets are to
work perfectly on their own terms, the information available to all
participants must be perfect. Since that's never true, a case to
intervene in markets can always be made, if only to correct
information flaws."

That's at least partly what happened with
Enron. The information given to investors -- in this case, the
participants in the company's 401(k) retirement plan -- was faulty at
best and fraudulent at worst. They were asked to trust company
officials with their retirement incomes.

But Enron overstated its profits -- by about
$586 million -- "through a fiendishly complex scheme that included
roughly 30 partnerships with privately held firms -- many run
profitably by Enron executives -- that were used to shift debt off
Enron's books. The result: a boosted stock price and inflated credit
rating. The rah-rah stock ëanalysts' touted Enron even as it was
collapsing. (Moberg)"

As the Washington Post reports: "The
number of corporations retracting and correcting earnings reports has
doubled in the past three years, to 233, an Andersen study found.
Major accounting firms have failed to detect or have disregarded
glaring bookkeeping problems at companies as varied as Rite Aid
Corp., Xerox Corp., Sunbeam Corp., Waste Management Inc. and
MicroStrategy Inc."

That leaves investors -- many of whom
invested as part of their 401(k) plans or other retirement accounts
-- in a difficult position, unable to make informed decisions about
their financial futures. They are left to assume that the information
that firms release is accurate, and when it's not, they are left with
empty accounts and bleak futures.

This distortion of the process was made
worse by the obscene amount of money Enron and other large
corporations have dumped into the political process over the years.
This money not only gave Enron executives access to the Bush
administration, but also gave it a seat at the table when policy was
being crafted and allowed it to operate rather freely without much
interference.

That's one of the lessons we need to draw
from this debacle. The legalized corruption that passes for our
campaign finance system needs an overhaul, the money needs to be
cleared out and the money for access game needs to end.

In addition, we need more transparency in
our financial system, so that shareholders have better and more
accurate information, so that corporate boards cannot mask their
losses or falsely inflate their gains to manipulate stock prices. It
is absurd and very possibly criminal that Enron was able to
miscalculate its bottom line by about 20% and that shareholders and
not the corporate officers who cooked the books have been made to
pay.

And we need to develop a better pension
system, one that does not rely on the stock and bond markets, that is
more stable, more secure than what we have now. The retirement
incomes of far too many workers are at the mercy of the stock and
bond markets -- Marie Cocco reported in Long Island Newsday
(N.Y.) in December that the average 401(k) balance in 2000 was
$49,000 and that fewer than half of all private-sector workers are
covered by a retirement plan, including those covered by 401(k)
plans.

We have to look at Enron as a symptom of our
sick economic order and not as the disease itself.

Hank Kalet is a poet and managing editor
of The Cranbury Press and The South
Brunswick Post. He can be reached via e-mail at
hkalet@hotmail.com.